Interest rate: average of current loans
The interest rate on a Federal Consolidation Loan is the weighted average of the interest rates of the loans being consolidated. A “weighted average” means that the interest rate on a large loan counts more in the average than the interest rate on a smaller loan. For instance, if you have $10,000 in loans at a 6% interest rate and $2,000 in loans at an 8% interest rate, the weighted average for the $12,000 Federal Consolidation Loan will be 6.4%. The average is rounded to the nearest one-eighth of 1 percent, but it cannot exceed 8.25%.